Florida settles with Fort Lauderdale firm over foreclosures

State regulators have reached their first settlement with one of the eight law firms being investigated for allleged improper and shoddy practices involving home repossessions for lenders.

Florida Attorney General Pam Bondi on Friday announced her office has reached an agreement with Fort Lauderdale attorney Marshall C. Watson and his law offices following a eight-month inquiry. The civil settlement calls for the firm, while not admitting any wrongdoing, to pay $2 million and imposes specific standards for foreclosures.

Among them: The firm must submit court files only with original notes or lost note affidavits and proof that mortgage is in default, and name only one unknown person when serving the legal papers for a foreclosure – a response to allegations that foreclosure attorneys were padding fees by serving multiple unknown parties. The firm also must review its cases currently in litigation to ensure they are compliant.

Half of the $2 million settlement will go to the Attorney General's office. The other half will go to the Florida Attorney General Mortgage Foreclosure Grant Fund, which funds Legal Aid positions to help low-income families facing foreclosure.

Watson's firm cooperated with the state investigation from the beginning, and spokeswoman Sarah Cohn said the firm already is following the new standards. "With our firm's tight controls now in place, we are setting a high bar for the mortgage law provider industry," said Watson in a written statement Friday.

It's not known how the outcome will impact the other ongoing investigations.

Two other firms who came under scrutiny when Watson did – the law offices of David J. Stern in Plantation and Shapiro & Fishman in Boca Raton and Tampa – have fought the state's subpeonas, claiming only the Florida Bar can regulate attorneys. Both have actions seeking to block the Attorney General pending before the 4th District Court of Appeal in West Palm Beach.

Attorney Jeffrey Tew, who represents Stern, had no comment on the Watson settlement. Representatives for Shapiro & Fishman could not be reached comment despite attempts by email.

Shari Olefson-- a Fort Lauderdale real estate attorney and author of Foreclosure Nation, a book about the subprime mortgage crisis -- questioned how much influence the agreement will have on future attempts to repair the broken foreclosure processing system.

"Basically, all they are doing is saying from now on, follow the rules," Olefson said. "Two million probably is nothing to [the law firm]. No one is addressing the root cause of the problem."

The settlement comes about a week and a half after federal mortgage guarantor Freddie Mac removed its files from the firm, a move Cohn said was by mutual agreement. Freddie Mac and Fannie Mae, the government's other major mortgage backer, pulled its files from Stern's firm and others last fall.